Thursday, November 24, 2016

Neither Consumers nor Producers Benefit from Putin’s Ban on Food Imports or Will by Its Extension

Paul
Goble

Staunton, November 24 – Vladimir
Putin says he wants to extend his ban on the Western food imports “as long as
possible” in order to help domestic producers and at least ultimately to help
domestic consumers.But in fact, neither
is being helped by this Kremlin policy now, and both are likely to suffer more
in the future.

Opposition leader
Grigory Yavlinsky says in a blog post today that “it would be good to think not
only about the domestic producer but also about the domestic consumer.” And if
one does that, one sees that this Kremlin policy has been a disaster both
directly and indirectly for the Russian people (echo.msk.ru/blog/yavlinsky_g/1879960-echo/).

Among the negative consequences for
the consumer have been a 32 percent rise in food prices over the last two
years, the public spectacle of the destruction of food when 57 percent of
Russians now as opposed to 37 percent two years ago say they must economize on
food purchases, and a reduction in quality foodstuffs and an increase in
unhealthy ones.

Such things might appear to be
justified if in fact the Russian agricultural sector was really benefitting
from this ban, but in fact, the reverse is true. As “Nezavisimaya gazeta”
points out today, “the rate of growth in agricultural industry this year is
below the average of the last 17” (ng.ru/economics/2016-11-24/1_6867_myth.html).

That gives the lie, Anatoly Komrakov
says, to claims by the Russian authorities that agriculture is becoming “’a
locomotive’ for the entire economy.” (That expression belongs to Deputy Prime
Minister Arkady Dvorkovich.)That simply
isn’t true, as government statistics themselves show.

But Dvorkovich is hardly alone in
making false claims. Putin says that the great success of Russian agriculture
has been responsible for holding down inflation, and Prime Minister Dmitry
Medvedev has said that Russian farms are increasing production at rates “not
seen either in Soviet or post-Soviet times.”

In a normal market economy, if
production is increasing, then prices should fall; but because of increasing
poverty, Russians lack the money to spend even on food and farmers are boosting
prices in the absence of competition from better foreign imports, to the
detriment of all Russians.

What the country needs, experts say,
is a program to boost the purchasing power of impoverished Russians, perhaps
one that would resemble the food stamp program in the United States. Until
something like that happens, the trends in agriculture and the Russian food
supply are likely to remain negative.

But instead of moving in the direction
of providing more support to agriculture and consumers, the Russian government
is cutting back. The Russian authorities say they are being forced to cut back
on spending on agriculture next year by approximately 50 billion rubles (800
million US dollars) (ronsslav.com/vlasti-rf-sokrashhayut-rashody-na-selskoe-hozyaystvo/).

As always, Moscow is trying to shift
the blame to the regions by demanding that they come up with the money to pay
for programs the center no longer will.But because of the absence of genuine fiscal federalism in Russia, the
regions don’t have the money to do so – and consequently, both producers and
consumers are likely to suffer even more in 2017.